College Students Can Mis-Manage Credit Cards

Written by: Kristy Welsh

Last Updated: July 24, 2017

As we have touched on before here at Credit Info Center, credit card companies are more aggressive than ever when it comes to marketing cards to college students. This heavy-hitting attention to the extension of credit to college students would perhaps be less of a gross offense provided schools used this as an opportunity for financial education. On the contrary, college students as a whole remain remarkably illiterate when it comes to credit card use. They are mis-managing their credit cards by being ignorant of interest rates, late payment fees, and overbalance penalties.

According to a survey conducted by the International Journal of Business and Science:

Fewer than 15 percent of college students know the interest rates on their credit cards.

More than 75 percent of college students are unaware of late payment fees on their credit cards.

Fewer than 30 percent know the penalty for being over their credit card balance.

Overall, fewer than 10 percent know their interest rates, late payment charges and overbalance penalties on their credit cards.

How Prevalent is Credit Card Use Among College Students

For the first time in history, student loan debt exceeds the nation's credit card debt. This is a double-whammy for college students graduating with tens of thousands of dollars in student loans AND what could easily amount to the same amount of debt to credit card companies. In fact, 70 percent of college students have credit cards. Thirty-four percent have the seemingly-manageable one credit card, but 36 percent of college students have two or more.

What Are College Students Using Their Credit Cards For, and How Often

Though college students say they do use their credit cards for books and supplies, the vast majority do not report using their cards for tuition or room-and-board. Nearly half of college students say they only use their credit cards for emergencies. It may be assumed that the other half of credit card-using students charge food, clothes, entertainment, and other living expenses. As for frequency of use, 36 percent of college students use their cards fewer than five times per month, while 13 percent say they use their cards "frequently."

Habits of College Students on Their Credit Card Payments

Only a little more than 9 percent of college students say they pay off the balance on their credit cards each month. This spells trouble, as the vast majority of students don't know their interest rates and, in turn, don't know how much debt they are accumulating by carrying a balance from month-to-month.

Do Demographics Make a Difference When it Comes to College Student Credit Card Use?

There does seem to be some correlation between credit card literacy and the age, employment, and marital status of students. Younger students use their credit cards more often than older students. And students who are employed and/or married exhibit greater financial literacy than their unemployed, single counterparts. Gender and degree major seem to make no difference.

Bottom line, ignorance contributes to the mis-management of credit cards among college students. Clearly credit card companies and schools of higher learning aren't going out of their way to help students master the ins-and-outs of smart credit card use. This seemingly leaves it up to parents to take the initiative to share their knowledge and experience with their college-bound kids.